Tax filers can claim a 鈥�,鈥� which is money you can deduct from your income for yourself, your spouse 鈥� if you鈥檙e married 鈥� and for each dependent you鈥檙e claiming on your returns. This year that exemption rises by $50 from last year to $4,050 for all taxpayers, though it gets smaller for higher-income earners. This means that a married couple, with two children, filing jointly, can deduct $16,200 (4 people x $4,050) if they earn less than $311,300.
Another way to reduce your taxable income is through a 鈥渟tandard deduction.鈥� You can claim either the standard deduction, which ranges from $6,300 for a single person to $12,600 for a married couple filing jointly, or choose to itemize deductions such as state income taxes and property taxes. You can鈥檛 do both. To figure out which reduces your tax obligation more, add up your itemized deductions and compare that total to the amount of the standard deduction you qualify for, . It might help to know that the 2016 standard deduction for 鈥渉ead of household鈥� filers has increased from last year by $50 to $9,300.
Lisa Greene-Lewis, a certified public accountant who works for tax-filing software company TurboTax, says that about 75 percent of people automatically take the standard deduction because it's easier to do. But they could be leaving money on the table by not itemizing, she warns.
